Hong Kong’s budget deficit is expected to double to HK$100 billion this financial year, finance chief Paul Chan has said, citing a property market slump that weighed on government coffers.
Chan, at a meeting with the Legislative Council (LegCo)’s panel on financial affairs on Monday, said the deficit for the 2024/25 fiscal year would more than double from the HK$48 billion forecast this February.
The updated estimation would mean a third fiscal year with a deficit exceeding HK$100 billion, after the city recorded a deficit of HK$122 billion in 2022/23, and HK$101.6 billion last year.
Chan expected the government to have HK$685 billion in reserves by the end of March, when the current fiscal year comes to a close.
Residential property prices have seen a marked decline in recent years and have dropped continuously since mid-July, despite the government’s move to axe extra stamp duties to revive the market this February.
The hobbled property market meant less revenue from land sales and stamp duty, Chan said at the Monday LegCo meeting, pointing to “geopolitical tensions and other uncertainties.”
Land sales slump
According to official figures, land-related transactions from April to October – including land sales and lease modifications – brought about HK$3.7 billion in revenue.
Chan in February predicted that land sales would bring in HK$33 billion, and stamp duties HK$71 billion.
But it will take three to four years to bring the budget out of the red, he said.
Hong Kong earlier this month brought its economic growth forecast for the year down to 2.5 per cent, from the previous estimated range of 2.5 to 3.5 per cent.
Chief Executive John Lee announced relaxed mortgage rules allowing homebuyers to finance up to 70 per cent of a flat’s value during his Policy Address this October, amid the home price slump.
Chan’s February budget factors in HK$120 billion in proceeds from issuing government bonds. Excluding that, the initial HK$48 billion deficit was HK$143 billion.
Chan on Monday also said that the government will rely on cutting costs to balance the books.
“Finding new revenue sources is not the top priority,” he said. “We are focusing our fiscal consolidation programme on cutting expenditure, and we will be communicating with different bureaux and departments.”
The finance minister also said that the incoming Trump administration was likely to implement expansionary fiscal policies which would slow down any potential interest rate cuts.
“With the US dollar peg, the Hong Kong dollar will remain strong for a while,” he added.
